AI Fraud: The Hidden Dangers of Machine Learning-Based Scams

ACFE Research Specialist

Laura Harris, CFE

Artificial intelligence (AI) itself is not inherently fraudulent. AI is a field of computer science that focuses on the development of computer systems that can perform tasks that typically require human-like intelligence, such as learning, problem solving and decision making. AI technologies are used in a wide range of applications, including speech recognition, language translation and image recognition.

However, like any technology, AI can be used for both legitimate and illegitimate purposes. There is the potential for AI to be used to facilitate fraudulent activities, such as  generating fake or misleading information, or automating scams or other fraudulent schemes. AI can also be used to detect and prevent fraud by analyzing data and identifying patterns that may indicate fraudulent activity.

Machine learning is a subfield of AI that focuses on the development of algorithms and models that can learn from data and improve its performance over time. Machine learning has already made a significant impact in a variety of fields, including computer science, finance, healthcare and transportation, and it is expected to continue to play a major role in the future of AI and other emerging technologies with the development of new algorithms and approaches that can enable machine learning systems to perform more complex and sophisticated tasks.

The use of AI in fraud depends on how it is implemented and used. Individuals and organizations should be aware of the potential risks and take appropriate measures to protect themselves from fraudulent activity, whether it involves AI or other technologies.

There are a few reasons why someone might use AI for fraudulent purposes:

• Speed and efficiency: AI can process large amounts of data and perform tasks quickly, which makes it a potentially useful tool for automating fraudulent activities.

• Anonymity: AI can be used to carry out fraudulent activities without leaving a traceable human trail.

• Evasion of detection: AI can be used to generate fake or misleading information that is difficult for humans to detect as fraudulent.

• Personal gain: Fraud is often motivated by a desire to obtain financial or other benefits through deceptive or dishonest means. AI can be used as a tool to facilitate this type of activity.

• Generating fake or misleading information: AI could be used to create fake websites, social media accounts, or other online content that is designed to deceive or mislead people. This could include generating fake reviews or manipulating online ratings to mislead consumers.

• Automating scams: AI could be used to automate scams or fraudulent schemes, such as by sending out mass emails or text messages that are designed to trick people into revealing sensitive information or sending money.

• Spoofing phone numbers or email addresses: AI could be used to create fake phone numbers or email addresses that are designed to deceive people into thinking they are communicating with a legitimate entity.

• Generating fake documents: AI could be used to create fake documents, such as contracts or invoices, that are designed to mislead or deceive people.

• Automation of scams: AI could be used to automate scams or fraudulent schemes, such as by sending out mass emails or text messages that are designed to trick people into revealing sensitive information or sending money.

• Evasion of detection: AI could be used to evade detection by generating fake or misleading information that is difficult for humans to identify as fraudulent. This could make it more difficult for authorities to identify and track down cybercriminals.

• Increased sophistication of attacks: AI could be used to increase the sophistication of cyber-attacks, such as by generating more convincing phishing emails or by adapting to the defenses of targeted organizations.

Impersonation

AI systems can be used to impersonate a real person in a number of ways, depending on the specific context and the capabilities of the AI system in question. Here are a few examples of how AI could be used to impersonate a real person:

• AI systems can be trained to generate text or speech that is designed to mimic the style, tone, and language patterns of a particular person. This could include generating social media posts, emails, or other forms of written communication that are designed to sound like they were written by a verified source.

• AI systems can be used to generate images or videos that are designed to look like a particular person.

• AI systems can be used to manipulate online profiles or accounts to make them appear more like the person being impersonated, including changing profile information or generating fake activitiy on social media or other online platforms.

The use of AI to impersonate a real person can be a highly sophisticated and effective form of deception, and it is important for individuals and organizations to be aware of the potential for this type of activity and to take steps to protect themselves from it.

There are a few ways you can tell the difference between writing produced by a person and writing produced by AI. Here are a few things to consider:

• Style and tone: AI-generated writing may lack the subtle nuances and variations in style and tone that are characteristic of human writing. It may also contain repetitive or formulaic language.

• Grammar and syntax: AI-generated writing may contain errors in grammar and syntax that are less common in human writing.

• Cohesion and organization: AI-generated writing may be less cohesive and less well-organized than writing produced by a person. It may lack transitions or logical connections between ideas.

• Context and content: AI-generated writing may be less contextually relevant or may contain content that is unrelated to the topic at hand.

It is important to note that the capabilities of AI in generating human-like writing have improved significantly in recent years, and it is becoming increasingly difficult to distinguish between writing produced by AI and writing produced by a person. In some cases, it may be necessary to use multiple methods or to consult with experts in order to determine the source of a given piece of writing.

There are a number of steps that individuals and organizations can take to prevent AI-assisted fraud. Some recommendations include:

• Implement strong security measures, such as using unique passwords for all accounts, enabling two-factor authentication, and keeping all software and security protocols up to date.

• Be cautious about sharing personal information. Be selective about the personal information you share online and be cautious about responding to requests for personal information from unknown sources.

• Verify the authenticity of information and communications. Be skeptical of information and communications that seem suspicious or too good to be true and take steps to verify their authenticity before acting on them.

• Educate yourself about the common signs of fraudulent activity, such as unsolicited requests for personal information or offers that seem too good to be true.

• Report suspicious activity. If you suspect that you are the target of fraudulent activity, or if you come across suspicious information or communications, report it to the appropriate authorities or organizations.

By following these recommendations, you can help protect yourself and your organization from AI-assisted fraud and other forms of cybercrime.

ACFE Training Director, Jason Zirke, CFE, used AI to write the following anti-fraud poem:

A deceitful act, a moral waste

Lies and tricks for personal gain

Leaving others in financial pain

From identity theft to Ponzi schemes

Fraud takes on many different means

It preys on those who trust and believe

Leaving them hurt with no relief

It lurks in shadows, waiting to pounce

It preys on those who don't keep an ounce

Of skepticism, or trust too much

Falling victim to its wicked touch

But fear not, for justice will prevail

The guilty will be sent to jail

They’ll pay for their crimes, that much is true

Fraudsters can’t escape their due

 So, report the fraud and don't be shy

Seek help, don't let the fraudster by

Stand up and fight, don't let them win

Together we can stop this sin

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